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Did corn bottom on USDA reports?

Ray Grabanski 01/14/2014 @ 7:21am President, Progressive Ag www.progressiveag.com

The government report last week was a bit of a surprise for corn, with lowered production numbers 61 mb vs. expectations of another rise in production.  USDA got there by raising harvested acres, and lowering yields in the report for a net loss of 61 mb of production in corn.  USDA also shed carryout in the report instead of increasing it, as quarterly stocks implied larger corn feeding and disappearance than expected.  So USDA hiked feed use 100 mb in this report, and we ended up with a 1.6 billion-bushel carryout instead of some expectations of 2.0 billion. 

Corn prices responded by first running 5c lower before the report in anticipation of a bearish report, and then running nearly 20c higher on the actual numbers, for a upside reversal on daily charts.   That could signal the bottom in the corn market, finally, after running lower for the past 16 months.  So corn charts are suggesting a possible bottom, while wheat prices ran to new lows Friday on bearish numbers, and soybeans also losing value after trading 20c higher into the report and losing most of those gains by the end of the day.  

So while we are getting signals that corn prices may finally have bottomed, we are not getting those same signals in soybeans and wheat - yet! However, corn is the big dog in the grains, and what corn sees perhaps just takes a little more time for other crops to see.  

While the corn report held some surprises, the traders had well anticipated the soybean report as carryout stocks were kept right at about where the trade expected them in the U.S., with USDA hiking production 0.3 bu/acre to 43.3 bu/acre.  The trade also well anticipated the production hike of 31 mb, and the corresponding hike in demand of essentially the same amount, with a hike in exports of 20 mb and 10 mb hike in crush.  That left soybean carryout unchanged.  

When looking at world numbers of soybeans, though, there was more carryout projected as South American production was once again hiked in this report.  That left the SAM producer with more stocks to sell, and world carryout was a bit more than expected.  

Wheat was the one crop that held the most negative numbers, with more U.S. and world carryout than expected.  This pushed wheat sharply lower on Friday, and we had new lows for most classes of wheat by the end of the day.  It's hard to imagine wheat getting much more negative without pressuring corn as well, as wheat once again may enter feedgrain channels in the world in certain spots where corn is hard to get.  

Pro Ag had been getting less negative both corn and wheat heading into the report, as we had bought back between 75% and 100% of corn hedges and 100% of wheat hedges prior to the report. Final Pro Ag downside price targets for this year's crops had been $4.25 corn, $11-$11.10 soybeans, and $6 CBOT wheat.  

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